Spanish stocks rally harder than U.K. after Scottish ‘No’ vote

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MADRID (MarketWatch) — The biggest reaction to the Scottish referendum “No” vote on Friday wasn’t seen in the City of London, but rather in Madrid, where stocks galloped ahead on the view that Spain’s own independence movement has now lost strength.

The benchmark Spain IBEX 35 index IBEX, +1.29% rallied 1.2% to 11,122, outperforming the rest of Europe, including the FTSE 100 UKX, +0.77% which managed a gain of 0.6%. The IBEX shot up 1.5% in opening trades.

More than a week ago, 1.8 million people formed a giant “V” in the streets of Barcelona on Catalonia’s national day to demand a vote on independence, which the government says is unconstitutional. Some Catalan separatists, such as a group of firefighters, even traveled to Scotland to voice support for breakaway movements in both countries.

The pro-separatist Catalan regional government has said it plans to hold a non-binding independence referendum on Nov. 9. A bill allowing the November vote is slated to be approved Friday afternoon by Catalonia’s regional government, The Wall Street Journal reported. Madrid’s government has warned Catalonia not to go through with the vote.

Relief rally: Predrag Dukic, senior equity sales trader at CM Capital Markets, said big Spanish companies such as Iberdrola SA IBE, +1.33% Banco Santander SA SAN, +1.35% SAN, +0.91%  and Repsol SA REP, +1.00%  have been underperforming over the last few sessions over fears of a Scottish “Yes” vote.

“These companies have significant businesses in Scotland and have a great weight in the Spanish index. They are outperforming today,” he said in emailed comments. Iberdrola rose 1.3%, Banco Santander added 1%, and Repsol nearly 1 percent.

“The ‘No” vote eases fears over a possible Catalonian referendum. There will not be a legal referendum now, in my view, which is positive for Spain and Europe,” said Dukic.

Separately, Telefonica TEF, +1.65% TEF, +0.58% a heavyweight in Spain, jumped 1.3%, which Dukic said was due to deal announced Friday to buy Brazilian-based GVT from Vivendi SA VIV, +0.69%  for €7.24 billion ($9.3 billion).

A Spanish outperformer: Stocks in Spain in generally have had a positive year as the country slowly crawls out of a deep recession that began back in 2008. Stocks have attracted investors, with the IBEX 35 up 21% in 12 months and 12% year to date — neck and neck with the performance for Italian stocks FTSEMIB, +0.85%  .

Ramón Morell, strategist with ETX Capital España, said he’s been seeing investor flows to Spain from banks in London and the U.S., with buying from the domestic sector also providing a positive backdrop.

“When people around here start investing and the stocks go up, the other ones outside see opportunity as well. It’s an auto-feed. Other indexes in Europe are also going up, and Spain is looking to see what the (German) DAX is doing,” he said.

The DAX DAX, +0.89%  has been battered this year by concerns over growth, and is among the region’s weakest performers, up 3.4%.

 

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